Brough's writings on the technology, economic and social issues of communications at the intersection of the Internet, telecom and mobility.

July 08, 2008

One patent justifies Microsoft's interest in Yahoo

I've watched coverage of Microsoft's bid for Yahoo! and the related maneuvering between Google and Yahoo!. The explanations are not very convincing. Microsoft doesn't need Yahoo's search technology or their morale-impacted work force. Yahoo's search market share continues to decline and there's little of strategic relevance in the rest of their business. What's the attraction?

Usman Latif has the first interesting explanation I've seen, which he explores in depth in a ten page article at Techuser. The issue he uncovers is US patent 6,269,361 on the bid-for-position paid-for search mechanism that funds Google and indeed all of the Web 2.0 phenomena. Patent '361 was issued to GoTo.com, later called Overture, in 2001. Yahoo! acquired Overture in 2003 and used the '361 patent in litigation with Google shortly thereafter.

Usman is uniquely positioned to recognize the importance of this patent as he has followed paid-for search patents for years and has previously written (in 2005) about the strange settlement between Google and Yahoo, reached on the eve of Google's IPO. Google negotiated a perpetual, royalty-free license to this patent, but it is not irrevocable! Usman's surmise is that Google's license would be revoked if they sue Yahoo over any other intellectual property. That's a commonly requested clause in such agreements and, on the eve of their IPO, one that Google likely had to submit to.

If you are at all interested in patents or in the current Microsoft-Yahoo-Google machinations, take a look at Usman's paper. It makes more sense that all the fluff that's been written in the financial press.